outliving your super

Average life expectancies continue to increase, raising the question of whether there is a chance that you can outlive your retirement savings?

Survey results have found that people are underestimating their life expectancy by an average of five years, suggesting that many people haven’t allocated enough to allow them to live comfortably in their later years.

If you are worried about outliving your super, you are not alone!

A 65-year-old could realistically spend three decades in retirement, yet many are not planning for this. A survey by Challenger found that only 40 per cent of Australians over 45 years of age expect to have a comfortable lifestyle in retirement. It was also found that 49 per cent of Australians over 45 years of age were concerned about running out of super before they pass away.

So how can you plan ahead and give yourself confidence that your super last?

How to plan for retirement income that will last a lifetime

1. Understand your retirement goals

The first step is understanding the type of lifestyle that you desire in retirement and what financial planners recommend saving accordingly. Do you have a travel bucket list and a desire to enjoy the finer things in life? Are you happy staying close to family and living a low-key lifestyle?

According to ASFA’s latest September 2021 Quarter release, for homeowners, the minimum annual cost of a comfortable retirement is estimated to be:

  • Singles: $45,239 (aged 67-84 years) and $42,846 (aged 85+ years).
  • Couples: $63,799 (aged 67-84 years) and $59,389 (aged 85+ years).

The lump-sum savings required to generate the above figures are estimated to be $545,000 (for singles) and $640,000 (for couples).

If you hope to have a comfortable lifestyle during retirement, you will need to save significantly more than the minimum. We always recommend speaking to a Financial Planner about your unique situation and making a plan to suit your unique goals.

2. Start planning as early as possible 

The earlier you start thinking about your future, the easier it will be to make your retirement dreams a reality. Research by the Association of Superannuation Funds of Australia shows that 40 per cent of people aged under 30 have no idea how much money they have in super. It’s very easy to set and forget your superannuation strategy at a young age. You may find yourself choosing a fund when you start your first job without giving much consideration to which fund you choose. But at a young age, small changes to the way your super is organised can make a big difference in the long run.

3 Boost your super with contributions 

If you’re worried about saving enough for retirement, contributions could be a great way to boost your super and provide you with confidence in your savings.

Where possible, make extra contributions to your super now and see the benefits in the long term. This can include personal contributions, voluntary employer contributions, spouse contributions or downsizer contributions.

If you are a low-mid income earner under the age of 71, you may also be eligible to receive a co-contribution of $500 contribution from the government.

4. Track down and combine Accounts

By tracking down and combining your super accounts, you can increase the rate your super grows each year (due to the compounding effect of additional funds and less fees). Just be sure to check that no benefits (insurance or otherwise) are lost by transferring to your chosen fund.

5. Speak with a Financial Planner

Still worried about outliving your super? We always recommend speaking with a Financial Planner about your retirement plans. A Financial Planner will be able to support you in creating a tailored plan that gives you confidence in your future.

Get in touch with the team at APS Financial Planning to learn more about preparing your finances to take you the distance.

outliving your super

Written by APS Senior Financial Advisor, Paul Hatzigeorgiadis.

Paul has over 25 years’ experience in the financial services sector. Over Paul’s history, he has provided advice to an extensive range of clients from wealth accumulators to pre and post retirees advising them on Wealth Creation, Cash Flow management, maximising Centrelink benefits in Retirement, Personal Insurances, Debt minimisation strategies and Superannuation. Paul is married with a 10-year-old daughter and enjoys spending time with family and friends.  He especially likes watching his daughter play Soccer for the Northern Falcons FC. Whether it’s assisting clients to meet their short-term goals or working with them over a longer-term, Paul enjoys helping guide his clients with their financial future.

Get in touch with Paul and the APS Financial Planning team!